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Sony's Blu-ray poised to win DVD standard battle

By YURI KAGEYAMAThe Associated Press

Mon., Feb. 18, 2008

TOKYO–Sony's Blu-ray technology is emerging as the likely winner in the format battle for the next generation of DVD players after Toshiba appeared ready to ditch its HD DVD business.

Such a move would help consumers know which system to invest in and would likely boost sales in Blu-ray gadgets, analysts say. But it will disappoint the 1 million people around the world estimated by Toshiba who have already bought HD DVD players.

Toshiba Corp. said Monday no decision has been made but acknowledged it had started a review of its HD DVD strategy. The comments follow a flurry of weekend Japanese media reports that the company was close to pulling the plug on the business.

A company official, speaking on condition of anonymity because she isn't authorized to speak on the matter, said a board meeting could be held as soon as Tuesday, where a decision is likely.

Both formats deliver crisp, clear high-definition pictures and sound, but they are incompatible with each other, and neither plays on older DVD players. HD DVD was touted as being cheaper because it was more similar to previous video technology, while Blu-ray boasted bigger recording capacity. Both formats play on high-definition TVs.

Only one video format has been expected to emerge as the victor, much like VHS trumped Sony's Betamax in the video format battle of the 1980s.

This time, however, it appears Sony will end up on the winning side.

"If true, this will be good news for the next-generation DVD industry in clearing up the confusion for consumers because of the format competition that had curbed buying," said Koya Tabata, electronics analyst at Credit Suisse in Tokyo. "This will work toward a profit boost for Sony."

The reasons behind Blu-ray's apparent triumph over HD DVD are complex, analysts said, as marketing, management maneuvers and other factors are believed to have played into the shift to Blu-ray's favour that became more decisive during the critical holiday shopping season.

Recently, the Blu-ray disc format has been gaining market share, especially in Japan. A study on fourth quarter sales last year by market researcher BCN Inc. found that by unit volume, Blu-ray made up 96 per cent of Japanese sales.

American movie studios also were increasingly lining up behind the Blu-ray standard.

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Last month, Warner Bros. Entertainment decided to release movie discs only in the Blu-ray format, joining Sony Pictures, Walt Disney Co. and News Corp.'s Twentieth Century Fox. That left only Viacom Inc.'s Paramount Pictures and General Electric Co.'s Universal Pictures as exclusive supporters of HD DVD.

On Friday, Wal-Mart Stores Inc., the largest U.S. retailer, said it will sell only Blu-ray DVDs and hardware. That announcement came five days after Netflix Inc. said it will cease carrying rentals in HD DVD.

Several major American retailers have made similar decisions, including Target Corp. and Blockbuster Inc.

Despite the reports, Toshiba's stock soared 5.7 percent to 829 yen ($7.69) in Tokyo as investors cheered the likely decision as lessening the potential damage in losses in the HD DVD operations, despite the blow to Toshiba's prestige.

Sony shares rose 1.0 per cent to 4,900 yen ($45.45 U.S.). The Tokyo-based manufacturer declined comment on the reports about HD DVD. Sony also said it did not have numbers on how many Blu-ray players had been sold globally, or a number for Sony brand Blu-ray machines sold.

Adding to Blu-ray's momentum was the gradual increase in sales of Sony's PlayStation 3 home video-game console, which also works as a Blu-ray player. Sony has sold 10.5 million PS3 machines worldwide since the machine went on sale late 2006.

But PS3 sales have trailed the blockbuster Wii machine from Nintendo Co., and the game machine wasn't widely seen as that critical to the video format battle.

Microsoft Corp.'s Xbox 360 game machine can play HD DVD movies, but the drive had to be bought separately, and its proliferation is believed to be limited. Toshiba said such players are included in the overall tally of 1 million HD DVD players sold so far.

Kazuharu Miura, an analyst at Daiwa Institute of Research in Tokyo, said the final holdout for HD DVD may come in personal computers, if Microsoft decides to continue to push HD DVD. But once the balance tilts in favour of one format, then the domination tends to become final, he said.

"You've seen this happen before, as in Macintosh vs. Windows," he said. "The content makers are going to choose one format, and the stores are going to want to stack their shelves with the dominant format, too."

Toshiba is expected to focus its resources on its other businesses, including computer chip production, such as flash-memory, which are used in digital cameras and cell phones.

The Nikkei, Japan's top business newspaper, reported in its Monday's editions that Toshiba plans to invest as much as 1.8 trillion yen ($16.7 billion) in two plants in Japan for its flash memory business for fiscal 2008, starting April 1. Toshiba said no decision has been made.

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